On the 15th of March 1921 Lenin put forward the New Economic Policy. The 10th Party Congress accepted it launching the epoch of NEP. NEP is usually considered to be a purely economic policy. However, this policy also meant the democratization of the existing political system, state bodies of power and administration, the renunciation of the extremities, and the strengthening of law and order. Historians like to quote Lenin's words: "NEP is serious and long-lasting." But as history demonstrated later, it was not very serious and, in any case, not for a long time. There are different explanations of these reasons. One of them, repeated time and again, is that Stalin put an end to NEP. This answer does not show all the circumstances, both subjective and objective, that brought about the end of NEP. Of course, Stalin played the key role here. But still why has the curtailing of NEP become possible? Many modern historians believe that the reason is that the economic reform was not accompanied by a thorough reform of the Soviet "military proletarian," political system. Its genuine democratization did not take place, the ruling party continued to dominate and use command methods to suppress free thinking. There remained grounds for the transformation of the party's dictatorship into the leader's dictatorship and his arbitrary autocratic use of state mechanism.
Lenin as the initiator of NEP realized that the transition to new economic relations required reforms in the political, social and administrative spheres. In August 1921 bearing in mind the necessity of reforming political relations, he remarked, "He who does not understand the replacement of the 'civil war' slogan by the 'civil peace' slogan, is laughable, if not worse." However this idea was not assimilated by the party leadership, and Lenin himself continued to abide by the former slogan. The turn towards NEP was affected under the severe pressure of total discontent of the peasantry, workers, and intelligentsia. It was not the result of the revision of the ruling party's policy and ideology - they remained the same: "the dictatorship of the proletariat," "the party's leading role," "the state as the main vehicle of socialist construction." The NEP still aiming at socialism, but using maneuver, social compromise with petty bourgeois majority of the population, was moving towards the planned goal though it was slower but with less risk.
Idea of Nep: Union of workers and peasants: The NEP was primarily an agrarian policy. At the 10th Party Congress Lenin explained that the peasants were not satisfied with the relationship they had with the ruling class. They clearly expressed their will - the will of the majority of the working population. The Congress changed this relationship on Lenin's initiative: the food expropriation was substituted for by the food tax.
Lenin's idea about the essence of NEP was the union of the workers and the peasants because only this union could solve the problem of Russia's economic backwardness. Russian economy was underdeveloped, there was a lack of free capital, it was no longer possible to resort to foreign capital for help. In order to solve these urgent problems one of the two excluding methods could be used; either to improve the provision of the agrarian sector with the means of production and thus to increase the labor productivity in agriculture (in this case it was necessary to bear in mind the withdrawal of capitals from industry and the slowing down of its development) or to channel all the resources into industrialization in order to create jobs outside agriculture. In the latter case peasants became the oppressed class. The Tsarist government in its time suggested that the second method should be used. Lenin's plan of NEP denied the possibility of the exclusive development of either industry or agriculture and the inevitability of direct or indirect infringement on industry or agriculture as the only source of economic growth. Industry and agriculture were to help each other and develop simultaneously following the scheme of the "technical union"; the reconstruction of heavy industry aimed primarily at the provision of agriculture with the means of production; the encouragement of agricultural entrepreneurs; the import of agricultural products to be sent to the market. Thus, the town will be fed and the country will resume its export of agricultural production, getting machinery and equipment for industry instead. At the same time the surplus of this production would stimulate the internal market development and would allow industry to accumulate necessary stocks for the following industrial development.
NEP in agriculture:
In 1921-22 the food tax was set at 8.6 billion pounds which was twice as less as the planned food expropriation for this year. One could speak about the considerable alleviation of the burden if it had not been for the fact that in 1920/21 the actual food expropriation was estimated at 8.6 billion pounds as well. One can judge about the "decreased" food tax (compared to food expropriation) by the fact that it made up 339% of the prewar direct tax. The importance of the introduction of the food tax was not in the alleviation of the burden but in the limitation of state arbitrariness.
On the 8th of March 1921 the peasants of the Panfilov district in Vologda region wrote to "our respected leader and great genius Lenin," "At present our peasants are deprived of almost everything: grain cattle, hay, raw materials...In 1920 because of the drought the yield was low, but the agents sent by the production committee, demanded more than was harvested." Vologda peasants asked Lenin "not to consider us to be subversive elements for the Soviet power, but wishing to do fruitful work in order to strengthen freedom for workers and peasants." They suggested that the food tax should be introduced instead of the food expropriation, so that every peasant "should know his tax and the time to pay it." The decree set the rate and the time for the food tax.
The new agriculture policy could not be limited by the substitution of the food expropriation by the food tax. This substitution meant that the peasants would be able to increase agricultural production without fearing any confiscation. This increase in agricultural production made sense only when it was legally possible to sell the surplus products. To the end Lenin did not want to give up the dream of immediate leap into communism. At the 10th Congress Trotsky recollected that a year before, back in February 1920 he had suggested that the food tax should be introduced instead of the food expropriation. At the 8th Congress in December 1920 Mensheviks and socialist revolutionaries speaking openly for the last time demanded the abolition of food expropriation. Lenin classified such demands as a "return to capitalism." Capitalism is trade, consequently it is "the freedom of trade, thus, back to capitalism."
At the end of 1920 a decree was issued concerning free food distribution. There was almost no food, but communism seemed to be around the corner. Abandoning food expropriation, Lenin clang to the hope of not allowing free trade and free market to mar the purity of communist relations. His project foresaw that the exchange among peasant farms should have a local character (horses, not trains were used to deliver goods). This was not even based on a buy-and-sell basis, but on the basis of natural barter. The utopia was dying in suffering. The reality proved to be more powerful. In 1921 the leader of the revolution was forced to admit: "Commodity circulation has failed as well as the commodity exchange; the private market proved to be more powerful and instead of the commodity circulation it resulted in ordinary buying and selling, that is a trade."
At first the revolution in the countryside meant the economic leveling out of all the farms and the hampering of social differentiation. The abolition of large farms and the hampering of social differentiation. The abolition of large farms and their division into smaller units provided every peasant family with an average of 2 hectares of good land (approximately half a hectare for each adult). It was extremely little but nevertheless it helped many families to make ends meet. The poorest peasants (12% in 1913 and 3% in 1926) who owned the smallest plots of land received a symbolic additional plot and the richest who had owned more than 10 hectares were forced to return part of their land during the period of redistribution of 1918-21, when the revived rural commune began fighting for the leveling out of plots and incomes. Divisions of land that followed one another decreased the size of plots steadily. Their number almost doubled during the revolution (16 million in 1914 and 24 million in 1924). The disappearance of rich landowners and the considerable weakening of the middle class peasants resulted in lower grain production meant for sales outside the rural areas. Before the war these two categories of food producers marketed around 70% of grain. In 1926-27 the peasants consumed 85% of their own production. Out of 15% of marketable grain 4/5 was owned by poor and middle-class peasants. The Kulaks (Fists) who made up about 3% to 4% of the rural population marketed the rest. This did not make the work of state procurement bodies easier.
One more consequence of the revolution in the countryside was "the archaisation" of the peasantry. It manifested itself in the drastic decrease of labor productivity - it decreased twice compared to the prewar period. The reason for it was the permanent lack of utensils and horses. In 1926-27 40% of devices for tilling land were wooden ploughs; 1/3 of the peasants had no horses, the main implement of production on a peasant farm. No wonder the harvests were the lowest in Europe. This "archaisation" also manifested itself in the closed character of the peasant community, a return to the self-contained economic system and the stoppage of social mobility. The 1920's became a period of flourishing of a rural commune - a body of genuine peasant self-government. The commune was responsible for its collective life, but did not exercise, like it did before, petty administrative surveillance over each peasant-member of the commune; this function was carried out by local party cells. Communal traditions, being very liable, prevented even the most enterprising peasants, (mainly the young ones just back from the army) from becoming totally independent owners of their plots. In the 1920's less than 700 thousand peasants left the communes. Before the revolution, seasonal work was an outlet for the tension created in the overpopulated villages. The problem was still acute in the 1920's. Although there was a fall in labor productivity, still the excess of rural population was 20 million people. Yet their choice was limited. While before the war around 10 million peasants left villages annually and were hired as agricultural workers, forest-guards or manual workers, in 1927 this figure was only 3 million. The difficulties created by this drop in hired temporary labor force outweighed economic gains the peasantry got as the result of the revolution, (insignificantly larger plots, decrease in indirect taxation and rent).
The beginning of summer brought about the threat of impending hunger. Addressing world proletariat on the 6th of August Lenin says that a number of the regions of Russia are struck with worse hunger than in 1891. The figure in 1891 of those starving was 964,627 people in the Volga area. In 1921 the figure was in millions; 20% of the whole population was starving, and more than 25% of the rural population. Writer Michail Osorgin, the editor-in-chief of Pomotsh ("Help") bulletin, published by the All-Russia Committee on helping the starving people, who knew the situation in hunger-stricken areas from hundreds of letters, writes that cannibalism became a "usual event." "People ate their relatives, feeding older children, having no mercy for infants who hadn't known life, though they were of little use. People ate people separately, not at the family table and there was no discussion about it." Hunger was the trial and the cornerstone for the new rule; it faced the problem that could not be solved by force. The success of the October revolt, the victory in the civil war created the mentality of the conquerors in Bolsheviks, the conviction that everything could be solved with the help of a soldier's rifle.
Lenin's struggle for the human existence of some people was closely connected with the annihilation of other people, and "the extermination of the kulaks," seemed to him to be the best way to get bread for the people. In 1921 no extermination could help; peasants were deprived of all stocks. Even seed-corn was confiscated. "Peasantry of the Volga area visited by terrible droughts, have long ago established the rule to have seed-corn and grain for at least 2 or even 3 years. And this rule was ruthlessly broken by our time," wrote Bonch-Bruevich. Like other state leaders he considered drought to be the main reason for hunger.
In 1891 Vladimir Ilyich stated that it was only the government that was to blame for hunger and "all-Russian" ravage. In 1921 drought was to blame for hunger and it was the result of the civil war. Speaking at the 9th Party Congress Trotsky summarized the results of the war: "We have devastated the country in order to defeat the white guards." However, the main reason for hunger was the policy of food expropriation, the policy of immediate leap into communism.
The absence of reserves, hunger in urban areas (unlike in 1891), destroyed transport, peasants' unrest, worker's discontent created a critical situation. Out of all the capitalist countries the US was the only one that could render assistance. The Western Europe ravaged by the war was barely able to provide for itself. But the Soviet government did not dare to turn for help to capitalists fearing to be refused. Such a refusal by capitalist countries could render assistance to the state that had the world revolution as its final goal, seemed quite natural to Lenin in the first half of 1921. This hopeless situation forced Lenin after much hesitation to agree to the formation of the All-Committee on helping the starving people. On July 21st, 1921 Kalinin signs a decree of the All-Russian Central Executive committee on the formation of this body. Well known representatives of Russian science, literature, culture, pre-revolutionary public and political figures became its members. Many of them hesitated before they started collaborating with the Soviet power. But the desire to help the starving people outbalanced their doubts.
NEP in Industry:
The living conditions of the workers, on whose behalf the revolution was possible, were significantly worse then that of the peasants however. Unemployment was mounting. "For nine years after the October revolution the workers of the leading branches of our industry cannot even dream about their prewar wages." It was perfectly natural that the workers were dissatisfied with the policy that let peasants live better.
There was a feeling of depression among the grass-root members of the party, about their longing for the lost benefits of war communism. "There were the Wright brothers, - recollects a character of the Red trees sitting in a dungeon where the last remaining genuine communists get together, - they decided to fly high up in the sky but they fell down and perished...Comrade Lenin perished like the Wright brothers...Nobody except us remembers what great ideas existed at the time. We are like the Wright brothers," These are the longings of "a communist of the war communism draft disbanded in 1921."
NEP meant a radical change in industry. Small private enterprises were allowed, private persons were given the right to rent large enterprises, foreign investors acquired the right to have concessions in industrial enterprises and in the extraction of mineral resources. But more important was the change in the workers attitude to labor. Workers participated in all the marches against the communist power, but the main manifestation of their dissatisfaction with the revolution's results was the decrease in labor productivity. "In 1919-20 the average output of a worker per year equaled 45% of his prewar output." The "big leap into communism" program proceeded from the necessity to make the worker work. Labor concentration camps were called "schools of labor," by Derzhinsky. Trotsky put forward "the program of the militarisation of labor," of the formation of "labor armies." He called in question the notion of slave labor unproductivity:
"Is it true that forced labor is always unproductive? My answer is that it's the most pitiful and vulgar superstition of liberalism. A man does not want to work. But the social organization forces him and urges him in this direction. The outcome of this is the following: it is necessary to force and urge the worker. It turns out that forced labor is unproductive, then the whole of the socialist organization is doomed to be pulled down."
NEP in Culture:
At the beginning of the 1920s education was often reduced to superficial ideological brain-washing and hasty shallow study of the rudiments of culture. Lenin believed that it was necessary to draw on the most progressive elements of Russian cultural heritage and begin educating the population on a mass scale. Backwardness of the country could be overcome and political ideas could be implanted in people's minds only by means of raising of the general cultural level. At the same time Lenin rejected any idea of the independent development of national culture. The population's cultural level was rising very slowly compared to the rich intellectual life of the intelligentsia.
With the introduction of NEP the choice of books became more varied, political control loosened its grip. State publishing committee was no longer the monopolist in the book publishing business. There reappeared private publishing companies, that published Soviet and foreign authors. The 1920s were a unique time in the history of the Soviet state when the book print run partially depended on the reader's requirements. The amount of political literature dropped significantly. By 1927 its share was less than 15% of all the printed matter except newspapers.
Dispute regarding ways of the countries development:
There was not limit to the growth of the Soviet state, economic and party machinery. In 1928 it numbered 4 million employees. This gigantic machinery, run from the center, was unable to run the country in normal conditions. "They are dissatisfied with the state machinery! - exclaimed proletarian poet Demian Bedny in its defense. It needs terrific tension to make the proletarian steamer move. Besides, this steamer pulls behind itself a huge barge, a peasant barge which is slow, clumsy and unwilling to move." The state machinery was unable to carry out the tasks in conditions of "civil peace,": it was awkward, slow and incapable of independent action., it was made up of two hostile elements, the unqualified sometimes illiterate communist leaders and clerks trembling with fear. Fear was systematically and constantly cultivated. The only body of the Soviet power that was known by all the Soviet citizens (it became well-known outside the country as well) - Tchk-OGPU, (extraordinary commission) became synonym of good work. Every time it was necessary to do something fast, an institution was formed that was called an extraordinary commission.
Lively interparty disputes all through the 1920s were due to the problems stemming form various difficulties and the obvious failure of the workers' and peasants' union. There existed two wings: "the left wing," supported by Trotsky, Preobrazhensky and Pyatakov, pursued their policy through VSNKH (All-Soviet Council of the national economy) and "the right wing," represented by Bukharin, its main theorist, and Dzerjinsky who realized its ideas VSNKH in practical terms. It was at the 12th Party Congress in 1923 that Trotsky insisted on the establishment of the "dictatorship in industry." The difference between high prices for industrial goods and low purchasing prices in agriculture immediately revealed the industry's incapacity to produce cheap goods. The reduction of cost price and the growth of labor productivity became the most important tasks. Trotsky believed these tasks could be solved by the proletariat only through its particular efforts, because the proletariat operates the state's command levers and it should be ready to give a loan to the state if the state is unable to pay its full wages at the given moment. In later years he often came back to the idea that "the scarcity of goods" endangered economic balance. However, along with the problem of industrial growth the problem of investments was most important. In the book New economics, published in 1926, Preobrazhenksy again raised the question of "primary socialist accumulation," first studied by Trotsky back in 1923. In the conditions of hostile international environment and economic backwardness it was possible to accumulate the necessary means only through their "pumping," from the private sector (agriculture) into the state sector (Socialist sector). It was possible to affect this "shift of capitals," through the taxation of peasants (especially well-to-do ones), and an unequal goods turnover. Such "primary socialist accumulation," followed by discontent of a great number of petty peasant producers, could lead to the growth of industrial production in the framework of one plan and the reduction of prices for industrial goods which could consequently convince peasants of the righteousness of such policy.
Bukharin believed that such policy "killed the hen that laid gold eggs," and deprived the union of workers and peasants of the last hope for the future. In his opinion it was necessary to provide for the peasants' needs, to convince them of the profitability of producing more and consistently developing market economy. He spoke about this in his famous speech on April 17th, 1925, when he called upon the peasants to "enrich themselves without fearing any repression's." In order to overcome technological backwardness the peasants had only one way out: to unite into production and distribution cooperatives supported by the state. Thanks to these cooperatives peasant economy would gradually approach the state sector's level providing it with the necessary means for its slow movement towards socialist economy. Bukharin believed that this process had to last a number of decades, but it was less dangerous than a drastic break with the peasants. Such a break was inevitable because of the extremely high rates of industrialization carried out at the expense of the countryside.
Other party leaders - Stalin, Kamenev, Zinoviev - had no clear-cut understanding of the ways of the country's economic development. They pursued a shortsighted policy, the aim of which was the struggle for power.
Thus, until 1924 Zinoviev and Kamenev supported Stalin against Trotsky and sided with the right wing, but beginning from 1925 they changed from the right wing for the left wing and became Stalin's and Bukharin's opponents together with Trotsky. Stalin could skillfully navigate between them and play the role of an imperial judge before he used his left wing opponents' ideas, having already provided for his personal political victory. The achievement of power for him was a necessary introduction.
Legal Basis of NEP:
NEP, that aimed at the revival of market relations, demanded corresponding legal support and, first of all, the strengthening of the legality. The 11th All-Russian party conference stated that the new types of relations created "on the basis of economic policy pursued by the new power, were to be reflected in law and to be legally defended." Yet, the ideas of "revolutionary legality," formed during the civil war, did not undergo any changes; they were mainly governed by the established ideas of their correspondence to party ideology and the understanding of justice as a class notion. It proceeded from the idea of "the dictatorship of the proletariat," that did not function according to the general human laws, but according to its specific laws and in conformity with "revolutionary thinking." An article from the Annual Soviet Justice, (1922), reads: "Does it mean that the publication of written laws abolishes revolutionary thinking as the basis for verdicts? Far from it. Revolution is not in the archives yet and revolutionary thinking should be present in every verdict and decision: it is only limited by written norms, but not abolished."
Some results of the NEP:
For the first two and one half years of NEP it was possible to believe that capitalist relations could develop in the framework of the Soviet power. At the time Bolsheviks were discouraged by hunger. They let the private sector reconstruct the devastated economy and capitalist elements started to grow. It was the time of establishment of some sort of civil order and talks about "revolutional legality," were fashionable. But in March 1922 Lenin proclaimed a slogan about the "command heights of socialism." Neither in 1922 in Genoa nor in the Hague did Bolsheviks manifest any concession in relation to European capitalism. Finally in 1923 Lenin's heirs started an offensive against the private sector and in particular against its capitalist elements.
In 1924 it was possible to write about the revival of capitalism in Russia only presuming that we deal with short-lived communist cramps. But by 1927 capitalist flowers had already withered. One could speak about the capitalist victory in Russia ignoring that long way covered by Russian economy within 3 years, from 1924 to 1926. This period is characterized by 1. the process of fast agricultural and industrial reconstruction, 2. considerable growth of commodity-monetary relations, 3. the fact that the development of these relations was almost completely utilized by the so-called socialist organizations, while the development of the capitalist elements was suppressed by the Soviet power. The same processes continued in 1927.
In 1926-27 it became obvious that the "union of workers and peasants," was on the verge of collapse. The Soviet power's miscalculations were not limited by an unbalanced price policy. The government neglected various types of cooperation such as artels, TOZ (fraternities on joint land tilling), that appeared spontaneously and in 1927 already united about 1 million farms. State farms were totally neglected. This seemed all the more surprising because state farms were rare islands of state sector in the countryside. But they could not be an example for petty landowners because they were extremely poor. As far as the seed selection, the improvement of land utilization, enlargement of farms, the dissemination of agricultural education in the countryside, the training of agronomists and mechanics were concerned - all this was reflected in the decisions and documents approved at the highest level. Yet, it only remained on paper.
These facts are obviously known to Zagorsky, an expert in the Russian economy. If in 1927 he dared to speak about the capitalist victories in the Russian economy, it can be explained by the unclear understanding of the term "capitalism," which was true of much Russian literature. Zagorsky tends to refer any development of commodity-monetary relations to capitalism. This is not true. Only an entrepreneur's household, run to bring profit, can be called capitalist, but family households, though more or less involved in barter relations, cannot be called capitalist. Only an economy in which capitalist enterprises play the leading can be called capitalist. In this particular case European capitalism is meant, which is characterized by its possession of the manufacturing process proper and in connection with this, its thorough reorganization.
Undoubtedly, the development of commodity-monetary relations is an inalienable prerequisite for capitalism. But it is not the only one it needs. A number of both subjective and objective conditions is necessary for the successful development of capitalism. In medieval times, in Islamic countries like India, China commodity-monetary relations were very well developed, but the manufacturing process retained its family labor character and capitalism was not created by these civilizations. Capitalism as it exists now is a specific achievement of only West European civilization. From Western Europe it started spreading all over the world when it managed to create necessary social grounds for itself in other countries.
On March 15th, 1921 Lenin announced the substitution of food expropriation by food tax and recognized the peasant's right to freely dispose of their products after paying the food tax. This decision was followed by numerous consequences and was the turning point of the process of partial restoration of the Russian economy.
This period is characterized by the growing tendencies to limit the field of private enterprise which had originally been rather widely planned. Finally, by the winter of 1927 private trade was almost liquidated and the communist power resumed mass compulsory expropriation of food products. This act shook the foundations of the economic system which had asserted itself for the past seven years. During the last year the Soviet policy had been extremely contradictory. The Soviet power either tried to restore the basis of NEP or resorted to methods of pure command economy. It testifies to the fact that the period described has all the features of a transitional period. After seven years of its existence the NEP faced its end.
New economic policy is usually considered to be the period of cultural, ideological détente between two intense periods. From mid 1980's the Soviet government attempted to restore the new economic policy. Cooperatives in the mid 1980's became the most important innovation in the economy. They were in fact private enterprises engaged in the production of consumer goods and services. "This innovation was really successful, though it brought about final disorder in the economy as a whole."
The main difference between the NEP of the 1920's and economic innovations of the mid 1980's lies in the political-ideological sphere. The NEP in the 1920's dealt with all spheres of social life: economy, politics, culture. Alongside with economic innovations there reigned political terror. The Soviet leadership of the 1980's did not tighten the political and ideological grip. On the contrary, Gorbachev's revolution liberated historical memory, printed matter, and expressible thought. But the development of this process almost immediately got out of the leadership's control. Nowadays in such a transitional moment it is timely to look backwards and try to understand the nature of that economic system that was formed under NEP, and the reasons for that past economic upheaval as well as for its present crisis.
(most of the these sources were brought over to me by my father who often travels to Russia)